How (and Why) Ikea, Apple Extend Control Across Their Supply Chains

Companies like Ikea and Apple have been investing in their supply chains in order to avoid unknown and potentially environmentally damaging activities from their suppliers by purchasing forest, building wind farms, and taking over plastics recycling plants. Ikea has purchased forest in Romania and the Baltics, while Apple has invested in forest in the US, writes The Guardian.

In order to assess where risk might be occurring within a supply chain, companies should consider “supply chain network mapping,” the process of creating an end-to-end map showing the connections, relationships and dependencies between manufacturing and suppliers, suggests Bindiya Vakil, founder and CEO of Resilinc, a provider of supply chain risk solutions (via Supply Chain Dive). Vakil says that a typical high-tech manufacturer could have nearly 1,000 suppliers, with as many as half of them being single source. Should something happen to that supplier or with the supplier relationship, the whole supply chain can be thrown into disarray.

To combat this type of risk, Ikea has just acquired a 15% minority stake in a plastic recycling plant, Morssinkhof Rymoplast, in the Netherlands, with an investment that comes from its budget allocated to sustainability measures. The plant will help Ikea reach its goal of manufacturing plastic products using only recyclable and/or recycled materials by August 2020. The investment will also help the plastics recycling plant develop its capabilities. Ikea’s chief sustainability officer says this is its first investment within the recycling industry.

Additionally, the investment will help Ikea secure recycled material if tougher regulations requiring producers to include a certain percentage of recycled plastic in their products lead to a material shortage.

Dexter Galvin, head of supply chain at CDP, says many companies with “at risk” supply chains are looking at this type of vertical integration model. CDP is a not-for-profit charity that runs the global disclosure system for investors, companies, cities, states and regions to manage their environmental impacts.

Data collected by SCM World in 2016 from 1,409 supply chain professionals around the world shows that supply shortage of raw materials and components ranks number four on their list of top supply chain concerns (via Fortune). Other top five concerns include data security/IT incidents, shipping/logistics disruptions, legal/regulatory issues, and breach of intellectual property rights.